In the months since Microsoft rolled out (and subsequently reversed) its controversial digital licensing policies on the Xbox One, plenty of people have been asking themselves, "What were they thinking?" According to Microsoft Director of Product Planning Albert Penello, a lot of what they were thinking was simply along the lines of "Man, I hate getting up to change game discs."

"Absolutely true story, one of my favorite stories," Penello told Ars during a recent interview. "People want to know, 'Why did you do this? What was the impetus to go to an all-digital system?' And everybody remembers this scenario: when we did the original Kinect take-home... and we were testing for different homes, different lighting conditions, the beta take-home had all of the Kinect games available to be played off the hard drive. One of the number one pieces of feedback for the take-home—remember, we were testing facial recognition, voice recognition, lighting, gestures—the number one piece of feedback: 'Why can't all my games be played off my hard drive like this?'"

"It really sat with the team," Penello continued. "Once we were able to actually just launch from game to game to game without having to get up and put in a disc—do it right from sitting down at your couch—we were like, 'Holy crap, putting in discs sucks.' No one ever believes me when I tell this story, but that was absolutely the genesis of the whole thing—how can we have a system now where I have my whole game library just sitting on the console, so I [can] switch between games as easy as I switch between apps on my phone."

“Certainly our messaging was horrible”

Looking back on it now, Penello says he's "glad we made the change" to allow discs on the Xbox One to work like they always have. But he also expressed some regret over how Microsoft initially sold its all-digital vision to the public. "Certainly our messaging was horrible," he admitted. "One of the things I think happened is it's something that leaked and people had had time to think about all the worst-case scenarios, so by the time we actually confirmed it... all the rumors about it had been leaking out, and people had gone and gotten themselves into a frenzy about it. When we announced it, people didn't hear everything; they just heard the confirmation of the things that they were worried about."

"There's all these cool things we can do: your games can follow you everywhere, family-sharing types of programs, trying to bring some of the console-type benefits to digital that didn't exist, and people were like, 'Oh, we're not ready, too soon.' So I'm glad we made the change, and again, it's interesting watching people come back, now that we've made the change, go, 'Well actually I kind of like some of the things you guys were talking about.'"

While Penello granted that gamers weren't ready for a "totally different model" for their disc-based games, he noted that they are fine with similar models in other contexts. "If you are used to the Windows model, that Windows disc is exactly that model—it's just a bit delivery system—but people aren't used to that for games. That's one of the things where I think we said, 'You know what, we were a little farther ahead of this change than our customers were. I'm glad we made the change. I don't regret it at all—it was totally the right call."

Penello reaffirmed his belief that Microsoft would eventually arrive at some sort of hybrid model, where digital consumers get the benefits (and restrictions) Microsoft initially laid out while disc-based games are used the manner they always have. The main thing preventing such a model from being put into place for the system's launch, he said, is that Microsoft is too focused on moving the system from the purely digital model it had in place initially.

"Unfortunately, the net effect of the change is we had to go back and redo a lot of work that we weren't anticipating at this point in the program," he said. "It's actually extremely difficult [to change]. It's a totally different purchase flow, it's a totally different UI. We have to think about security differently, permitting the customers when they can be offline and have to be online—it's actually pretty complex. It's not just communicating to the customers but making sure they understand what games they own digitally versus physically and what rights they have. We didn't have to think about those two modes before. It was all just going to be one mode; everything you owned worked one way. Now we have to think about two ways of ownership."

"So the reason we're not doing anything right now [with the hybrid model] is that we gotta launch," he continued. "Everyone is focused on shipping this year... when we get our heads up from trying to ship the box, we'll go back and rethink [how] this hybrid model is really going to work."

Regaining trust and taking criticism

Enlarge/ Penello pointed out that Sony hasn't shown the PS4's guts like Microsoft has for the Xbox One.

To some extent, Penello says, he understands when some people say they don't completely trust Microsoft following its reversal on Xbox One licensing. "I think over the last couple of years, we were focused on those new customers coming in, and I think we lost touch a little bit with the core gamers," he said. "My joke internally is our relationship with the core gamer is like your best friend whose phone calls you didn't return until you asked him for $500.' I think it's fair feedback. I think it was a wake-up call for the team."

At the same time, though, he admitted to some frustration that customers haven't given the company more credit for actually listening and changing things for the better. "I'm more surprised that [feelings of mistrust are] lingering now than that they lingered [after the announcement]," he said. "We had seen that people had been concerned about when it was rumored to be happening, so I sort of wasn't surprised [when it was announced]. But then when I changed back, we were like, 'Hey, we did it, we listened, we're with you,' and now everything we say gets criticized."

Penello also expressed frustration at the way Microsoft was getting treated by the press and observers when compared to a certain unnamed competitor. "I do feel like there's more scrutiny on what we do than on what our competitors are doing," he said. "We have been more transparent, and through that transparency you get to see the sausage getting made. You get to see the warts. Things that the other guys are getting away with is mind-boggling to me."

When pressed, he brought up one example from the coverage of Sony and the PlayStation 4 that he found particularly galling. "I only give this as an example because if this was us it would be the biggest news on the planet: no one has seen their box. No one has actually seen the insides of that box, no one has seen a piece of code running on their box. [Dev kits] are not the retail unit. The form factor they've shown—we showed the inside of our box, the inside of our unit back at E3. Everything you're seeing here is running off production code, except for the games that are still running on PC.

"I still haven't seen anything running on that actual [PS4] box," he continued. "It could be meaningless, I'm not condemning them to anything, but you've got a dev kit that's this big and a form factor that's this big, and I would like to see that running in that box. If we were doing the same thing... when we had that little thing at E3 where [a game] was running on a PC, even though we had said some games would be running on PCs, it was a huge conflict—[people said] we're having connection problems, we're having development problems. Now I'm showing everything running on a real shipping unit, and if the roles were reversed it'd be the biggest [issue]: 'We're all screwed, everything's terrible.'"

Kinect is “as fundamental... as the controller”

To anyone hoping that Microsoft might eventually relent on the Xbox One's Kinect integration and offer a lower-priced box without the 3D camera included, Penello said that while there were no such plans, "nothing's impossible." That said, he suggested that the Kinect was such an integral part of the system that selling it without the camera would be silly.

"Kinect is part of the Xbox One," he said. "It is part of the experience that we're building. It's as fundamental to the platform as the controller is in many ways. It sounds like I'm making up an excuse, but I think someone [could say], 'What if I shipped Xbox One without a controller, because you would prefer a different controller than the one I'm shipping?'

"It sounds like a silly analogy, but it's totally true. There are things you can do only with Kinect plugged in. There are features that are only enabled with that plugged in... We're building everything around Kinect. We're enabling you to not use Kinect, but the experience we're building, everything is built around Kinect."

Part of the problem in justifying the packed-in Kinect 2.0, Penello said, is that consumers are still in the mindset of the old Xbox 360 Kinect. "People think of Kinect on Xbox One the way they think of Kinect on Xbox 360: a motion gaming accessory," he said. "It is not a motion gaming accessory on Xbox One. It is a fundamental part of the platform.

"One of the things we're wrestling with is how many people haven't experienced it," he continued. "One of the challenges we face with an experience that requires you to interact with it is that I can tell you how awesome it's going to be, [but it] doesn't mean anything until you actually get to see it and decide for yourself... I think when it launches and people start using it, I will either be validated or invalidated.

"When we plugged online in in every console [on the original Xbox] and we said online was a core part of every box, people said, 'But I don't go online—why would I want to be online?' I have been through this sort of thing with people before, and all I can say is that we think about it as a fundamental part of the platform."

Promoted Comments

He makes some good points, though it's worth taking with a grain of salt too. It does bug me that every change Microsoft makes to move towards customer/gamer feedback gets called out as negative or evidence of being "wishy-washy". Sure, they seemed out of touch initially, but since when did a company actually responding to customer feedback turn into a bad thing?

347 Reader Comments

"One of the things I think happened is it's something that leaked and people had had time to think about all the worst-case scenarios, so by the time we actually confirmed it... all the rumors about it had been leaking out, and people had gone and gotten themselves into a frenzy about it. When we announced it, people didn't hear everything, they just heard the confirmation of the things that they were worried about."

I think this pretty much sums up a lot of the issues people have with the xbox. They didn't do enough to dismiss the "worst case scenarios" that people had started to believe were what was definitely going to happen.A mix of only bits of information leaking early along with poor messaging caused most of the outrage.

I'm sorry, does that mean Xbox discs are vinyl? Sadly, Penello is hardly the first tech marketing exec I've heard who seems not to know what "digital" means.

Digital has become industry shorthand for "downloadable" content with no physical component. So while it's technically inaccurate (since discs are digital too), it's lingo we're gonna have to learn to accept, I think.

Love them or hate them, if Microsoft had the ability to generate the kind of marketing spin akin to Apple, most of these controversies wouldn't have existed in the first place. I swear sometimes Microsoft could make free beer and pizza sound terrible.

No sir, that wasn't the problem. Leaks are part of the consumer electronics business today, and they don't really sink product releases unless there's an actual problem with the device being released.

No sir, that wasn't the problem either. The issue he's getting at is that the restrictions on the Xbox leaked before Microsoft could state their vision or context and were blown completely out of porportion.

Maybe he feels that he should be able to game without NSA monitoring him for faul language? Considering the MS - NSA relationship I'm not terrribly surprised that people are freaking out over the whole online and kinect camera always observing you.

It's basically what goes around comes around. If you behave like an ass people will expect it from you even on the very rare occasion you do not plan on being an ass.

Digital has become industry shorthand for "downloadable" content with no physical component. So while it's technically inaccurate (since discs are digital too), it's lingo we're gonna have to learn to accept, I think.

I'm sorry, does that mean Xbox discs are vinyl? Sadly, Penello is hardly the first tech marketing exec I've heard who seems not to know what "digital" means.

Digital has become industry shorthand for "downloadable" content with no physical component. So while it's technically inaccurate (since discs are digital too), it's lingo we're gonna have to learn to accept, I think.

There's a story Lincoln used to tell -

Abraham Lincoln wrote:

If I call a tail "a leg", how many legs does a horse have? Four. Just because I call it a leg doesn't make it a leg.

Edit - On reflection, when Penello says "digital" he's eliding the word "distribution". I, however, was mentally filling in that elision with "content". "Digital distribution" makes perfect sense in this context.

So the beta testers who sat in front of their TVs for hours at a clip have a problem standing up, and walking to their console every few hours? C'mon people.

With all the recent sales and free games coming out of the XBOX, I now have a huge amount content stored on my drive now. It is a much better experience than having to change discs. I really like switching to different games without having to get up to switch discs or stand at the media center looking for the exact disc I want, not finding it and then just giving up to do something else.

It seems like a small thing, but for me, has increased my enjoyment out of the system.

He makes some good points, though it's worth taking with a grain of salt too. It does bug me that every change Microsoft makes to move towards customer/gamer feedback gets called out as negative or evidence of being "wishy-washy". Sure, they seemed out of touch initially, but since when did a company actually responding to customer feedback turn into a bad thing?

Digital has become industry shorthand for "downloadable" content with no physical component. So while it's technically inaccurate (since discs are digital too), it's lingo we're gonna have to learn to accept, I think.

You're a journalist, you have the power. Fight back!

I do try to use "downloadable" instead of "digital" in my own writing, but when I'm quoting someone (or referring to their quote) or writing a space-constrained headline, for example, it's not always possible.

Maybe he feels that he should be able to game without NSA monitoring him for faul language? Considering the MS - NSA relationship I'm not terrribly surprised that people are freaking out over the whole online and kinect camera always observing you.

It's basically what goes around comes around. If you behave like an ass people will expect it from you even on the very rare occasion you do not plan on being an ass.

Hell, I just like single player games better. And if the game I want to play doesn't need any online components, why have them? Why make my game phone home to make sure I'm not a pirate when you already know I bought it, and the pirates are going to disable that feature anyway? And if you're going to take away the physical disc so that I can't resell it, you should give me a discount instead of charging me extra for the gift of having it be delivered by download.

"It really sat with the team," Penello continued. "Once we were able to actually just launch from game to game to game without having to get up and put in a disc, do it right from sitting down at your couch, we were like, 'Holy crap, putting in discs sucks.' No one ever believes me when I tell this story, but that was absolutely the genesis of the whole thing—how can we have a system now where I just have my whole game library just sitting on the console, so if I want to switch between games as easy as I switch between apps on my phone."

This sounds like typical talk from many corporations. "Our team sat down and decided what's best for you." So this team sat down in some fancy office and made decisions about what consumers really want and then they were shocked when all of us disagreed with them. Hmmm..., maybe you need some more focus groups or something...

Maybe he feels that he should be able to game without NSA monitoring him for faul language? Considering the MS - NSA relationship I'm not terrribly surprised that people are freaking out over the whole online and kinect camera always observing you.

It's basically what goes around comes around. If you behave like an ass people will expect it from you even on the very rare occasion you do not plan on being an ass.

What is with this obsession with Microsoft and the NSA? Yes the NSA overstepped it's bounds, but there's literally no reason to believe that Microsoft would ever let the NSA get access to that data. They freely admit that they themselves don't have access to that data. Not only that, you could always turn the Kinect off, it has a hardware light to show when it's active, and Microsoft went as far as to make it so you could unplug the damn thing.

The Xbox One is no longer a console problem, it is a PR problem. Ever since the Ratner moment (Brits will know what I'm talking about) of the head of the Entertainment Division saying in effect "If you're in the armed forces I don't want you as a customer", Microsoft have been defending their own conduct rather than positively promoting their console (see also Sony's PS3 launch, though that wasn't quite as bad since it was 'only' an issue of price).

We don't have an issue with it going digital, we have an issue with your terrible DRM plans. If you had allowed offline-play with the disc in (allowing non-internet users to have it their way) and have an offline mode for say, a month (isn't that how steam works?), then it'd be better.

DRM is fine, but if it interferes with the operation of the device to me, it's going to be a problem, and 1 day checkins? How could that not become an issue? Imagine if you moved and didn't have internet for 3 days and you just wanted to relax.

Maybe he feels that he should be able to game without NSA monitoring him for faul language? Considering the MS - NSA relationship I'm not terrribly surprised that people are freaking out over the whole online and kinect camera always observing you.

It's basically what goes around comes around. If you behave like an ass people will expect it from you even on the very rare occasion you do not plan on being an ass.

What is with this obsession with Microsoft and the NSA? Yes the NSA overstepped it's bounds, but there's literally no reason to believe that Microsoft would ever let the NSA get access to that data. They freely admit that they themselves don't have access to that data. Not only that, you could always turn the Kinect off, it has a hardware light to show when it's active, and Microsoft went as far as to make it so you could unplug the damn thing.

Microsoft being the first company to voluntarily join PRISM while advertising themselves as "The Privacy Company" hasn't helped them much.

If I call a tail "a leg", how many legs does a horse have? Four. Just because I call it a leg doesn't make it a leg.

This is a problem of semantics, not of identifying animal parts. At the level these people are thinking of, they're distributing it digitally through the Internet, not on plastic discs on trucks. At some level, distributing through the Internet comes down to electrons on copper and photons beamed through fiber, but it's at such a deeper level that it's ridiculous to think of it in those terms.

It's not unreasonable to call digital distribution through the Internet going digital when you compare it to the alternatives.

"It really sat with the team," Penello continued. "Once we were able to actually just launch from game to game to game without having to get up and put in a disc, do it right from sitting down at your couch, we were like, 'Holy crap, putting in discs sucks.' No one ever believes me when I tell this story, but that was absolutely the genesis of the whole thing—how can we have a system now where I just have my whole game library just sitting on the console, so if I want to switch between games as easy as I switch between apps on my phone."

This sounds like typical talk from many corporations. "Our team sat down and decided what's best for you." So this team sat down in some fancy office and made decisions about what consumers really want and then they were shocked when all of us disagreed with them. Hmmm..., maybe you need some more focus groups or something...

Pretty odd definition of "all of us" you are using there.Quite a few people either liked or had no problem with the new features, but the group that disliked them disliked them very much and very loudly.

"I do feel like there's more scrutiny on what we do than on what our competitors are doing," he said. "We have been more transparent, and through that transparency you get to see the sausage getting made. You get to see the warts. Things that the other guys are getting away with is mind-boggling to me."

What a load of bull! Put up or shut up Albert! You got scrutiny because of what YOU (M$) were trying to get away with!

Maybe he feels that he should be able to game without NSA monitoring him for faul language? Considering the MS - NSA relationship I'm not terrribly surprised that people are freaking out over the whole online and kinect camera always observing you.

It's basically what goes around comes around. If you behave like an ass people will expect it from you even on the very rare occasion you do not plan on being an ass.

What is with this obsession with Microsoft and the NSA? Yes the NSA overstepped it's bounds, but there's literally no reason to believe that Microsoft would ever let the NSA get access to that data. They freely admit that they themselves don't have access to that data. Not only that, you could always turn the Kinect off, it has a hardware light to show when it's active, and Microsoft went as far as to make it so you could unplug the damn thing.

Microsoft being the first company to voluntarily join PRISM while advertising themselves as "The Privacy Company" hasn't helped them much.

Microsoft is one of the largest and most influential software and services companies in the world, if the not the most. I doubt it was "voluntary".

The news of the NSA and Microsoft relationship, dating from 2007, earlier than any other tech company got on board, came out the very same day Microsoft showed off the Xbox One for the first time.

One news story is about how Skype is part of Prism, the next is that Skype works with the Xbox One, a console that has to keep a camera connected 24/7, that is always online, can film in the dark, etc.

Call me a cynic but I think it's hilarious that the new Kinect...which is apparently such an integral part of the new xbox platform the xbox can't be sold without it....won't work properly in half of the launch regions at release.

These guys don't get that the problem isn't with the method, it's with the restrictions. To treat the disc as if it's some magical key, yet treating a digital download as if it's stolen, and you have to go online every day to prove otherwise. I see tyranny playing out when it comes to digital rights, and consumers are sick of this shit.

The publishers and hardware makers are who decided that all you have is a license. When I buy a mass produced good, I own it, and it costs money to manufacture. When I buy a digitally copied item, I only get to lease it under the most draconian terms. This is the problem that knocks around inside of people's heads. This is the reason there is so much resistance.

You take away, and you take away. Eventually consumers revolt, and they are vocal.

Alas, it doesn't appear that they heard anything but what they wanted to hear.

I'm sorry, does that mean Xbox discs are vinyl? Sadly, Penello is hardly the first tech marketing exec I've heard who seems not to know what "digital" means.

Digital has become industry shorthand for "downloadable" content with no physical component. So while it's technically inaccurate (since discs are digital too), it's lingo we're gonna have to learn to accept, I think.

It's not really inaccurate, because they're talking about the distribution mechanism not the content itself. Downloadable games are distributed digitally (ie by downloading the data - which is of course digital regardless of how you get it - by a digital method namely the internet). Whereas retail games are distributed by pressing the digital content onto a physical medium and then putting those discs on a lorry - not even slightly digital

No need to insert discs: a good idea.Always online (forced): a bad idea.

Just make it so those who want to download their games and play without discs can, while those who don't want to go online can install and play normally from a disc. Best of both worlds.

Yea, this is exactly what I was thinking. The PS Vita is already kinda like this. All retail games are available in both downloadable form and cart form. One offers convenience, the other resale ability and saves space. The PS3 has been moving towards this model, and I bet the PS4 will have the same thing too. Why did they need to limit the disc part?

Kyle Orland / Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in Pittsburgh, PA.